Network Ties, Absorptive Capacity and Innovativeness of the SMEs in Sri Lanka

This study examines the relationship between network ties, absorptive capacity and innovativeness of SMEs in Sri Lanka. Data were gathered from 350 manufacturing firms located in Western province in Sri Lanka. Hierarchical linear regression analysis reveals that knowledge and resources embedded in network ties help focal firms to promote their innovative activities. Absorptive capacity of the SMEs is found as a key driver that assimilates, transforms, acquits and exploits knowledge passes through the network ties into commercial ends. Therefore, managerial attention is necessary important in developing absorptive capacity within the firms to capture the knowledge and resources embedded in the intuitional and personal networks for better innovative movements. Public policy should also focus to address the information barriers and resource poverty of the SMEs. Such attempts would help SMEs in finding new paths for innovative activities with external knowledge comes from wider links and enhanced in-house capacities